Newbuy scheme launched to back 95% mortgages
A mortgage indemnity scheme to help people buy new homes will be launched today.
Newbuy will help as many as 100,000 buyers obtain a 95 per cent mortgage to buy a new build property.
Under the scheme participating house builders will pay 3.5 per cent of the sale price from their homes into a fund. The government will put in extra support to bring the fund up to 9 per cent of the sale price.
Lenders who are signed up to the scheme will be able to recover funds if a buyer defaults on payments and the value of the property doesn’t cover the mortgage. The house builder’s contribution will be liable first, with the government only forced to step in if this is insufficient.
The scheme was announced in the Laying the foundations housing strategy in November. At the time the government said seven major lenders and around 25 house builders had agreed ‘in principle’ to take part. An update on this is expected later today.
The scheme will boost housing construction and provide 50,000 jobs, representatives from the construction industry have said.
Newbuy has been designed by the Home Builders Federation and the Council of Mortgage Lenders, with support from the government in the form of the guarantee.
Stewart Baseley, executive chairman of the HBF, said: ‘Newbuy will help thousands of people to meet their aspirations to buy a new home, freeing up the housing market and helping first time buyers and those unable to take the next step on the ladder.
‘The scheme will also provide a vital kick-start for house builders large and small who will be able to build the homes and create the jobs that the country desperately needs.’